At Factories, Is American Dream Slipping Away

For Mary Aremia-Van Alst, the happiest day of her 10 years working at Delphi Corporation is easy to pinpoint: It was the day she got the job.

"I was ecstatic," she says, referring to that day in January 1995. The auto-parts company, then a division of General Motors, was hiring in Flint for the first time in years.

The job offer was a passport to a paycheck that more than doubled her $10-an-hour wage at Citizens Bank.

It was also a ticket to a world where a working-class job could produce a middle-class lifestyle, with strong benefits and the money to send her children to a Catholic grade school.

Now, with Delphi headed to bankruptcy court early next year, employees like Aremia-Van Alst may have to take pay cuts of up to 50 percent. Suddenly, that solid standard of living appears to be hanging by a thread.

"I made a lot of life decisions based on the way things were supposed to be," she says, in between bites of an omelet at Toshi's, a diner near the Delphi plant. "Now they want to take half [of our pay] away from us."

What's playing out here in America's automotive alley may be the last gasp of the assumption that good factory jobs will last a lifetime. And workers here see it as something more — a warning that the American dream itself is at risk.

The outlines of the challenge go beyond the auto industry, they say — global competition, shrinking union bargaining power, an eroding industrial base. If middle-class paychecks continue to be clipped, they wonder, what will drive the economy forward? What tax revenue will the government have?

"It's a national problem that's going to escalate," says Mary's husband, Neil Van Alst, who also works at Delphi.

Such views are fed, in part, by the circumstances around them. As lifelong residents of this area, Mary and Neil remember the Flint of their youth, then known as "Buick City," as a kind of automotive boomtown. GM employed as many as 80,000 workers in a city with a population barely twice that number, propelling prosperity far beyond the city limits.

Today fewer than 20,000 auto jobs remain here.

Unemployment, at about 7 percent, is well above the national average of 5 percent. The home of Buick no longer makes that brand. An arch downtown proclaims Flint to be "Vehicle City."

This is also among America's most heavily unionized states. More than 20 percent of Michigan's workers are trade union members, almost double the national average.

But if the concerns of Mary, Neil, and other auto workers here are rooted in local circumstances, they also have broader grounding.

Nationwide, unemployment remains low by historical standards, but sectors of the labor market, especially manufacturing, have been losing in recent years. And despite a growing economy, wages for nonsupervisory workers haven't been keeping pace with inflation.

Against that backdrop, the views of people like the Aremia-Van Alsts form one side of a sharp national divide over the future of the economy.

Two Views of U.S. Manufacturing

One view, espoused by free-market disciples, is that the nation's prosperity hinges on its extraordinary flexibility in deploying labor and investment. That explains its edge in job creation compared with Europe's tepid performance. But it comes with difficult adjustments, such as the one Delphi faces.

The other side contends that as global competition grows stronger, flexibility alone isn't enough. They call for new policies to help retain and build middle-class jobs. The recipes vary, but they generally urge keeping a closer watch on whether free-trade policies are fair, fixing a hodgepodge health insurance system, and greater public investment in promoting new industries.

It isn't just the union rank and file who echo such views. GM chief executive officer Rick Wagoner, writing this week in The Wall Street Journal, said U.S. manufacturing faces "fundamental challenges," including soaring healthcare costs and unfair trading practices by foreign rivals — such as an artificially weak Japanese yen — that a company like GM can't solve on its own.

"Some say we're looking for a bailout. Baloney," Wagoner wrote. He conceded that GM must face many of its problems on its own. But "what we want … is the chance to compete on a level playing field."

No city symbolized GM's past prosperity — accounting for more than half of the U.S. car market in the years after World War II — like Flint.

And no region is more loyal to "made in the USA," at least when it comes to cars.

It's possible to drive the 80-odd miles from Detroit to Flint without seeing a single foreign nameplate on the road.

But Flint's population has declined since 1980, and its prized jobs have been steadily disappearing. GM plans to stop production at an engine facility, one of its several remaining plants here, in 2008 as part of a recently announced downsizing.

Delphi used to have two huge complexes here. Now, just one remains, and two of its seven plants have closed.

The next steps, as the parts-maker navigates bankruptcy, appear likely to include layoffs, wage cuts, and possibly the elimination of pensions for future retirees.

Lessons for the Family

For the Aremia-Van Alst family, it is a time of tough lessons.

"I can only hope and pray," says Mary. But she and Neil are also thinking ahead to a possible future without Delphi paychecks from the plant where they work on fuel-tank parts.

Mary says she may try to finish a degree in business management. Neil says he could do carpentry work. And both say they might train to be school teachers. In the meantime, they are trying to make sure their five children stick to the straight and narrow in their own education.

When one son got a few Ds last year, Neil says he hammered home this point: "If you don't go to college, you're not going to be able to afford an apartment, let alone a vehicle."

Their oldest daughter, ninth-grader Rachel, has a clear sense of the challenges the family faces.

"I want to keep my grades up," she says.

She hopes for a career in health care, and hopes her parents can keep their jobs and house.

This isn't the first time the auto industry has been through wrenching transition, thanks to rising foreign competition. And lots of unionized companies, from the steel industry to airlines, have been down the bankruptcy road before Delphi.

In many cases, the economy's vaunted flexibility has helped displaced workers find new jobs, but typically at lower pay than before. That's what has happened with legions of U.S. steel workers since the 1970s, when that industry declined.

Jared Bernstein, an analyst at the Economic Policy Institute in Washington, says that the typical layoff results in a 10 to 20 percent pay cut for the workers involved. And U.S. manufacturing, long a foothold of working-class prosperity, has been hit particularly hard.

"We are losing that foothold at a very rapid pace," he says.

In some ways, the auto workers are a victim of their own past success. As the industry rose, Henry Ford was once able to double worker wages.

But fewer have those jobs today. Per capita incomes in this city have fallen below the U.S. norm, and could fall further still as the auto industry goes through its next phase of cuts.

A coming restructuring plan at Ford Motor Co. will match GM in job cuts, eliminating 30,000 positions within five years, according to a report in Wednesday's Detroit News that cited people familiar with the plan. Delphi CEO Robert S. "Steve" Miller has said drastic action is needed for domestic industry to remain competitive.

That may be. But Neil Van Alst says the industry should survive by creativity, as well as cutbacks.

"Step up and create more innovation," he says. "That's what started all of these plants to begin with."

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